Did you know long-term care costs can surpass $100,000 annually?​

Plan Now For Long-Term Care Costs BEFORE You Think You May Need It

The term “long-term care” refers to extended custodial care for chronic disabilities and conditions. “Chronic” means these conditions are expected to persist, and not likely to improve with treatment.

While your insurance generally provides limited coverage for rehab facilities after a hospitalization or for acute conditions that will likely improve with treatment, neither traditional health insurance nor Medicare covers long-term custodial care for chronic conditions.

But these costs can be crippling for families that don’t plan for them in advance.

This article will explore what long term care is, what it costs, how you can plan for it, how long-term care insurance works, and what you can do to protect yourself and your family against the risk of needing long-term care.

What Is Long-Term Care?

When people hear “long-term care,” many immediately think of nursing homes.

While nursing homes are indeed a form of long-term care, they represent just one facet of a much broader spectrum. Long-term care encompasses a range of services designed to meet a person’s health or personal care needs over an extended period. These services help individuals live as independently and safely as possible when they can no longer perform everyday activities on their own.

Types of Long-Term Care Services:

  • In-Home Care Services: Assistance with daily activities like bathing, dressing, meal preparation, and medication management, provided in the comfort of your home.
  • Assisted Living Facilities: Residential settings that offer personal care services, housing, and health care for those who need help with daily activities.
  • Skilled Nursing Care: Medical care provided by licensed nurses, often necessary after surgery or during recovery from an illness.
  • Adult Day Care Centers: Facilities that provide social and health services during the day for adults who need supervision.

According to the U.S. Department of Health and Human Services, about 70% of people turning 65 can expect to use some form of long-term care during their lives. This statistic highlights the importance of planning ahead to ensure access to necessary care without compromising your financial stability.

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Long-Term Care Is Expensive

Understanding the potential costs associated with long-term care is crucial for effective planning.

The expenses can be substantial and may quickly deplete your savings if you’re unprepared. In fact, the cost of a skilled nursing facility can easily consume an entire pension if you don’t plan ahead of time.

Here are some numbers that you should use when planning for future long-term care needs:

National Average Costs (2023):

  • Nursing Home Care:
    • Private Room: Approximately $116,800 per year.
    • Semi-Private Room: Around $104,025 per year.
  • Assisted Living Facility: Median annual cost is $64,200.
  • Home Health Aide Services: About $33 per hour
  • Homemaker Services: Similar costs to home health aides at $30 per hour.

Source: Genworth Cost of Care Survey 2023

With the average length of long-term care being about three years, tota; expenses can easily surpass $300,000. These costs vary based on location, level of care required, and duration of care.

Additional Statistics:

Probability and Causes of Needing Long-Term Care

While aging increases the likelihood of needing long-term care, it’s not limited to the elderly.

Accidents, chronic illnesses, and disabilities can necessitate long-term care at any age.

Key Statistics:

  1. Age Factor: 70% of people over 65 will require some form of long-term care.
  2. Younger Adults: 40% of those receiving long-term care are between 18 and 64 years old, often due to accidents or illnesses.
  3. Chronic Conditions: Diseases like Alzheimer’s, stroke, and arthritis are leading causes. Over 6 million Americans live with Alzheimer’s, expected to reach nearly 13 million by 2050.
  4. Gender Differences: Women are more likely to need care, averaging 3.7 years, compared to 2.2 years for men.
  5. Disabilities: 1 in 4 adults in the U.S. lives with a disability, potentially requiring long-term support7.
  6. Life Expectancy: Increased life expectancy means more years potentially needing care. The average U.S. life expectancy is about 77 years.
  7. Family History: Genetics can play a role in the likelihood of developing conditions requiring long-term care.

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IMPORTANT! Medicare Does Not Cover Long-Term Care

A common misconception is that Medicare will cover long-term care expenses.

However, Medicare’s coverage is limited and does not include most long-term care services.

What Medicare Covers:

  • Short-Term Skilled Nursing Facility Care:
    • First 20 Days: Fully covered after a qualifying hospital stay.
    • Days 21-100: Requires a daily copayment (approximately $204 per day in 2024).
    • After 100 Days: No coverage provided.
  • Home Health Care: Limited coverage if specific criteria are met, such as being homebound and needing skilled nursing care.
  • Hospice Care: For those with a terminal illness and a life expectancy of six months or less.

What Medicare Does Not Cover:

  • Custodial Care: Assistance with activities of daily living (ADLs) like bathing, dressing, and eating.
  • Long-Term Residential Care: Extended stays in nursing homes or assisted living facilities for custodial care.

Without Medicare coverage for long-term custodial care, individuals must explore other options to finance these services.

How to Pay for Long-Term Care

Without long-term care insurance, the financial responsibility often falls on the following:

Personal Savings

Many people use retirement savings to cover long-term care costs, quickly depleting funds intended for living expenses or legacy planning.

Family Members

Loved ones may bear the burden, both financially and as unpaid caregivers.

Medicaid

Medicaid covers long-term care for those with limited income and assets but has strict eligibility requirements.

Specifically, before receiving benefits, unless you have long-term care insurance already in place, you may be forced to spend down your personal assets to near poverty levels before Medicaid will pay for long-term care.

  • Asset Spend-Down: Individuals may need to spend down assets to qualify, leaving minimal resources for personal needs.
  • Limited Choices: Medicaid-approved facilities may have limited availability or lower quality of care.

Selling Assets

Some may have to liquidate assets, such as homes or investments, to pay for care.

  • Impact on Estate Planning: Selling assets can disrupt plans to leave inheritances to loved ones.

The Solution: Long-Term Care Insurance

Long-term care insurance is designed to cover services not typically covered by health insurance, Medicare, or Medicaid.

It provides a safety net to protect your assets and ensure you receive the care you need in your preferred setting.

Benefits of Long-Term Care Insurance:

  • Financial Protection: Helps preserve your savings and assets for other expenses and inheritance.
  • Choice of Care: Offers more options for care facilities and in-home services.
  • Relieves The Burden on Family Members: Reduces the physical, emotional, and financial strain on family members.
  • Inflation Protection: Options to adjust benefits to keep pace with rising costs.

Types of Policies:

  • Traditional Long-Term Care Insurance: Stand-alone policies that cover a range of services.
  • Hybrid Policies: These innovative financial solutions combine life insurance or annuities with long-term care benefits, providing flexibility and potential income or death benefits if care isn’t needed.

Plan Sooner Rather Than Later

The best time to purchase long-term care insurance is when you’re younger and in good health.

Unlike traditional health insurance policies, long term care insurance plans aren’t required by law to accept people with pre-existing conditions. So apply now, before you have a change in your health or medical history.

Advantages of Early Planning:

  • Lower Premiums: Premiums are significantly lower for those who buy policies between ages 45 and 55.
  • Insurability: Health conditions can make you ineligible for coverage later. About 22% of applicants in their 50s are declined coverage due to health reasons, increasing with age 13.
  • Comprehensive Coverage: Younger applicants have access to more policy options and benefits.

Potential Savings:

  • The younger you are when you purchase it, the lower your premiums will be for the same benefit. 
  • Purchasing a policy at 55 versus 65 can result in savings of thousands of dollars over the life of the policy.

Taking Action Now

Don’t leave your health and financial future to chance.

By planning ahead, you can ensure that you receive quality care without burdening your loved ones or depleting your savings.

Steps to Protect Yourself:

  1. Assess Your Needs:
    • Consider your family health history, financial situation, and personal preferences.
    • Evaluate potential risks and how long-term care might impact your finances.
  2. Research Policy Options:
    • Compare policies from multiple insurers.
    • Understand the benefits, limitations, and costs of each option.
  3. Consult a Professional:
    • An HSA for America Personal Benefits Manager can guide you through your options.
    • Professional advice ensures you select a policy tailored to your needs.
  4. Consider Inflation Protection:
    • Opt for policies that include inflation riders to keep pace with rising care costs.
  5. Review and Update Your Plan:
    • Regularly revisit your long-term care plan to adjust for life changes.

Additional Protective Measures:

  • Disability Income Insurance: Provides income if you’re unable to work due to illness or injury.
  • Health Insurance or Health Sharing Plans: Ensure access to quality medical care.
  • Estate Planning: Incorporate long-term care considerations into your overall financial strategy.

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Conclusion

Long-term care is a reality that most of us will face, yet many are unprepared for the financial implications.

With costs soaring and Medicare offering limited assistance, long-term care insurance is a vital component of a sound financial plan.

By taking proactive steps now, you can protect yourself and your loved ones from the high costs of long-term care, ensuring that you receive the support you need without compromising your financial security.

Contact an HSA for America Personal Benefits Manager today to explore your options.

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